“The Plaza Accord is widely regarded as the most successful episode of coordinated interventions… “,” Kamal Sharma, director of G-10 FX strategy at bank of America Merrill Lynch, wrote in a statement Released Wednesday. Major players included grain exporters, the U.S. auto industry, heavy U.S. producers such as Caterpillar Inc. and high-tech companies such as IBM and Motorola. By 1985, their campaign had gained enough driving force for Congress to consider the passage of protectionist laws. The prospect of trade restrictions led the White House to open the negotiations that led to the Plaza agreement.  The Plaza Agreement is a 1985 agreement between the G5 countries – France, Germany, the United States, the United Kingdom and Japan – to manipulate exchange rates by devaluing the U.S. dollar against the Japanese yen and the German mark. The historic 1985 plaza agreement, signed at the Plaza Hotel in New York, was a growth agreement signed by West Germany, France, the United States, Japan and the United Kingdom. The objective was to force the United States to devalue its currency because of a current account deficit which, in accordance with point 6 of the agreements, is approaching about 3% of GDP. More importantly, European countries and Japan have experienced huge current account surpluses and negative GDP growth, threatening foreign trade and GDP growth in their home countries.
Although not all promises have been kept – the US public deficit has never been addressed and trade with Japan remains very loss-making – the Plaza agreement has proved to be a spectacular success. It is therefore not surprising that the 1985 agreement, concocted during meetings between the United States, Japan, West Germany, France and Great Britain at the Plaza Hotel in New York (acquired by Trump in 1988 and which had to be sold four years later by his lenders), brings back memories. In fact, Axios wrote Wednesday about speculation about the long-awaited prospect of a “Mar-a-Lago” deal. Sharma noticed another big difference between now and the 1980s.